Boeing yesterday won a huge, heatedly contested order from Australian airline Qantas for the 787, successfully denying rival Airbus any...
Boeing yesterday won a huge, heatedly contested order from Australian airline Qantas for the 787, successfully denying rival Airbus any traction for its proposed A350.
Qantas announced Tuesday evening a firm order for 45 Boeing 787 jets, worth more than $8 billion at list prices, and said it expects to eventually take a total 100 jets, which would bring the order to $13 billion.
The airline called the 787 the “cornerstone” of its ambitious fleet-modernization plan.
The deal includes 20 options, but “we regard the firm [orders] and the options as basically a done deal,” said Qantas Chief Executive Geoff Dixon in a teleconference. “Given that we are committed to this particular aircraft … we would expect to be taking up over a period of years round about 100.”
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Qantas Chairman Margaret Jackson called the 787 “a very clear commercial winner for Boeing.”
“This is a spectacular win for us,” said Boeing Vice President Mike Bair, 787 program chief. “Life is good.”
But Boeing and Airbus will continue to battle for Qantas’ favor because the airline deferred decisions on purchases of ultra-long-range and jumbo planes.
What’s the record Boeing is chasing?
It depends. Does McDonnell-Douglas count? Do orders count if they were later canceled? A guide:
1988 — Boeing’s best year for net orders. Taken together, Boeing and the then-separate McDonnell Douglas won 965 gross orders. After cancellations and substitutions in later years, the net order number for the year was 877 orders, the best ever. (For Boeing only, the gross order total was 655 and the net order total was 592.)
1989 — Boeing’s best year for gross orders. Boeing and McDonnell Douglas (separate companies until 1997) won a combined 1,107 gross orders. But after the first Gulf War, an unusually large number of these were later canceled or swapped for other planes. That lowered the net order number for the year to 713, the second-highest total ever. (The Boeing-only gross order total was 879 and the net order total was 560.)
2005 — Boeing’s total so far and prospects. As of Dec. 6, Boeing has 831 gross orders, counting only finalized deals.
To top the Boeing-only record gross order total in 1989, the company needs only 48 more commercial jet orders. But to make a total company record that reflects the McDonnell Douglas merger, Boeing needs many more.
Internal company documents obtained by The Seattle Times in September show that at that time Boeing projected 965 gross orders by year end, which would match the 1988 total for Boeing and McDonnell Douglas combined.
With less than three weeks to go, Boeing is still 134 shy of that ambitious target.
The Qantas order may be finalized in time to add to the tally. Already announced deals with Air India (23 jets) and Qatar Airways (20 jets) may also be inked in time.
Seattle Times researcher David Turim contributed to this analysis
The airline’s board rejected ultra-long-range aircraft offerings from both Boeing and Airbus. Qantas had wanted a jet that could leapfrog Mideast and Asian hubs and fly nonstop from Sydney to London. But Dixon said neither the Airbus A340-500 nor the Boeing 777-200LR met the carrier’s requirements on economics.
Qantas also deferred a decision between the Airbus superjumbo A380 and the new version of the Boeing 747 jumbo jet, Dixon said.
The 787 order gives the Boeing plane a new and unique niche: It’s going to be used in 2008 on the first low-cost carrier flying internationally, operated by Qantas subsidiary Jetstar International. One likely route, said Dixon: Sydney to Vancouver, B.C.
Another significant plus for Boeing is Qantas is the first airline seriously committed to buying the larger version of the 787-9, the stretch version, when it is available in 2011.
Airbus and Boeing have battled for this order for months, with competing billboards outside the Qantas headquarters in Sydney and repeated visits by sales teams and high-level executives. Boeing Commercial Airplanes CEO Alan Mulally met Dixon twice this year.
A week ago, the Qantas board postponed its long-expected decision to give the two rivals time to negotiate final offers.
“The best wine came from the Airbus side,” Dixon joked, “Unfortunately, [the Airbus proposal] never made the grade.”
The 787 now has a total 354 announced commitments from 26 customers, of which 229 are firm orders.
The Qantas agreement includes as many as 50 “purchase rights,” bringing the potential order to 115 planes.
Dixon said the 787 won on price and fuel efficiency. He also said that a week ago Boeing guaranteed it could deliver the first aircraft in 2008, and called that “a pretty big determinant” of the outcome.
Another element of the win may be Airbus stumbles.
Last month, the 787’s vice president for sale and marketing, Marty Bentrott, said Qantas was frustrated with Airbus. “The A330s that Qantas took from Airbus haven’t been the easiest introduction for them,” he said.
He said Qantas had incurred more costs than expected in reconfiguring the Airbus jets when switching them between domestic and international routes. He said the ease of reconfiguring the 787 had been a strong selling point.
Boeing’s global-supply chain for the new jet may also have helped win the order, with Dixon citing the Australian role in building the 787. Boeing’s Australian subsidiary Hawker de Havilland is contracted to design and manufacture the jet’s trailing edges of the wings at its Melbourne plant.
“The order could produce total flow-through economic benefits to Australia in the order of $2 billion,” Dixon said.
In the face of steep fuel price increases and heavy competition on international routes, Qantas is restructuring its maintenance and repair operations, slashing operating costs, cutting employees and planning for growth.
Qantas already has ordered a dozen Airbus A380 superjumbos, an airplane also on order for its main rivals: Middle-East carrier Emirates and Singapore Airlines. Tuesday’s announcement is a bold step to renew the rest of the wide-body fleet and grow the business.
A key part of the Qantas plan is to expand its domestic low-cost unit, Jetstar, to serve the Asia Pacific region and later to provide one-stop routes to Europe.
A week ago, Dixon got the go-ahead from the Qantas board to transform Jetstar into what should become the world’s first international low-cost carrier and the first such carrier flying wide-bodies.
The choice of the 787 for such a new venture is a tremendous boost to the Boeing program.
Dixon said that within five years, Jetstar would be operating a fleet of 60 narrow and wide-body aircraft across its domestic and international network.
On its international wide-body service, Jetstar will offer some frills, including premium class seating.
The initial regional services around Asia Pacific will start no later than January 2007, Dixon said, using A330s that will later be replaced by 787s.
With less than three weeks to go in 2005, there’s little doubt Boeing will best Airbus in orders for the year. Boeing was 140 orders ahead at the end of last month. What remains to be seen is whether Boeing can meet an ambitious internal target, set in September, of 965 orders for the year.
That number is significant, because it is the number of gross orders in Boeing’s most successful year historically: 1988. (That total counts both Boeing and McDonnell Douglas orders for that year, though they were still separate companies.)
As of December 6, Boeing was still 134 orders short.
Before the Qantas order news broke, Boeing’s stock price hit $70.94, an all-time high, Tuesday and closed at $70.59, the highest closing price ever.
Dominic Gates: 206-464-2963 or email@example.com
Seattle Times aerospace reporter David Bowermaster contributed to this report